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Trends & Analysis
News

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News

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News

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News

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US big banks report better-than-expected earnings

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Crude oil declines on profit taking

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US dollar recovers after 3 weeks of losses

Tuesday, December 05, 2023

Today’s headlines

What’s happening: The US dollar moved higher on Monday, after recording losses for three weeks in a row.

What happened: The US dollar had been under pressure due to speculations of the US Federal Reserve beginning to lower interest rates next year.

While the greenback recovered from weekly lows on Monday, the euro gained following economic data releases.

Why it matters: Speculations of the Federal Reserve being done with monetary tightening and beginning to cut interest rates next year have been providing a boost to riskier assets, while exerting pressure on safe-haven options like the US dollar.

Federal Reserve Chief Jerome Powell said on Friday that higher rates had resulted in a slowdown in the economy and that policymakers would need to move carefully. The US ISM manufacturing PMI for November came in weaker than expected, signalling the 13th straight month of contraction in factory activity.

Data released on Monday also showed that factory orders in the US had shrunk 3.6% in October, the biggest decline since April 2020. This followed 2.3% growth in September and came in worse than the consensus estimates of a 2.8% decline.

Last month, the EUR/USD pair climbed 3% and surged to its strongest level since August of over 1.10, following an easing in US inflation levels. The US dollar index, which measures the greenback’s performance versus a basket of major peers, shed 3.1% in November to record its biggest monthly decline in a year.

The US dollar index gained more than 0.4% to 103.71 on Monday, with investors buying the currency at more attractive prices, following three weeks of losses for the greenback.

Data released on Monday showed a decline in exports from Germany in October, denting prospects of stabilisation in Europe’s biggest economy. The EUR/USD forex pair fell around 0.4% to 1.0836.

The GBP/USD fell by around 0.62% to 1.2634 on Monday, while the Australian dollar also recorded losses versus the greenback.

What to watch: Investors await the release of retail sales data from the Eurozone, due to be released on Wednesday, as well as China’s trade data on Thursday.

Data on US jobs, due this Friday, will also remain in focus. The US economy is expected to add 180,000 jobs in November, compared to 150,000 in the previous month.

The ISM services PMI for the US will be released on Tuesday. The ISM services PMI, which declined to 51.8 in October, the lowest in five months, is expected to decline further to 51.5 in November.

The markets today

European stocks will be in focus today ahead of a basket of major economic reports

Context: European stocks edged lower on Monday, after notching sharp gains last week.

Details: The continued easing of inflation across major countries around the world has increased prospects of interest rates coming down faster than earlier expected, which has provided a boost to the global equity markets.

Declines in miners and energy shares due to weakness in commodity prices weighed on European indices, after the European benchmark index recorded gains for three consecutive weeks on prospects of rate cuts.

Shares of miners fell around 2.4% on Monday, with strength in the US dollar impacting copper prices. Energy shares also declined 1.6% on lower oil prices, as investors assessed the recent decision on output cuts by the OPEC+ (Organization of the Petroleum Exporting Countries and its allies). Meanwhile, retailer and bank stocks lent some support to markets.

The pan STOXX Europe 600 Index fell 0.09% to close at 465.78 on Monday, after hitting a new four-month high earlier in the session. Europe’s STOXX 600 has climbed around 10% year to date.

London’s FTSE 100 fell 0.22% to settle at 7,512.96, while France’s CAC 40 lost 0.18%. Germany’s DAX 40 bucked the trend and rose 0.04% to close at 16,404.76.

What to watch: Investors await the release of economic data on services PMI, composite PMI and producer price inflation from the Eurozone today. The HCOB services PMI is expected to increase to 48.2 in November, from 47.8 in the previous month, while the composite PMI is projected to climb to 47.1 in November, from around three-year lows of 46.5 a month ago.

Analysts expect producer price inflation in the Eurozone to ease to 0.1% in October, from 0.5% in September.

Other Markets: US trading indices closed lower on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.11%, 0.54% and 0.99%, respectively.

The news shaping the markets

A senior White House official said that the US will fall short of resources to provide further funding to Ukraine by yearend unless the Congress approves more funding. The news sent the RUB/USD pair slightly higher in forex trading this morning.


Colombia’s exports fell by 1.5% year-over-year to $4.1508 million in October. This being the eleventh straight month of decline exerted pressure on the COP/USD forex pair.


Ireland’s AIB services PMI rose to 54.2 in November, from 52.6 in October, sending the EUR/USD pair higher in forex trading this morning.


Hong Kong’s S&P Global SAR PMI rose to 50.1 in November, from 48.9 a month ago. This being the highest reading since June lent support to the HKD/USD forex pair.


Australia reported a current deficit of A$0.2 billion in the third quarter, versus a A$7.8 billion surplus in the prior quarter. The figure was significantly below market expectations of an A$3.1 billion surplus and sent the AUD/USD pair lower in forex trading this morning.

What else to watch today

Russia’s composite PMI and services PMI, South Africa’s S&P Global PMI and GDP growth rate, France’s industrial production, composite PMI and services PMI, Spain’s consumer confidence indicator, composite PMI and services PMI, Italy’s composite PMI and services PMI, Germany’s new passenger car registrations, composite PMI and services PMI, Eurozone’s consumer expectations for inflation over the next 12 months, UK’s New passenger car registrations, composite PMI and services PMI, Brazil’s loan growth, GDP growth rate, composite PMI and services PMI, US Redbook index, job openings, Manager’s index, total vehicle sales, RealClearMarkets/TIPP economic optimism index, job quits, and API crude oil stock change, as well as Canada’s composite PMI and services PMI.


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